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Employer contributions to change

05 December 2011

Employers of higher earners are being reminded that from January they will need to pay more in contributions for their staff.

In July 2011 the States Assembly agreed to increase Social Security contributions for employers of staff earning more than £45,336 per year. This increase in contributions was agreed by the Assembly as part of a 3-part plan to return to balanced budgets by 2013. The plan also included finding £65 million in annual savings and boosting economic growth.

The changes are introduced from 1 January 2012. Employers will have to pay a new 2% rate on employees’ earnings between the Standard Earnings Limit of £45,336 per year (£3,778 per month) and the Upper Earnings Limit of £150,000 per year (£12,500 per month).

This change also affects anyone with an annual income of more than £45,336 who pays Class 2 contributions. Class 2 contributions are paid by the self-employed and by people without employment.

New business start-ups

Social Security rules are also changing in January for anyone setting up a new business. Owners of new businesses will be able to pay a lower contribution rate for the first 2 full calendar years of trading.

The assessment of earnings in the early years of a new enterprise will no longer be based on the business owner’s previous earnings as an employee.

From January the newly self-employed will instead pay one third of the rate set for the Standard Earnings Limit. This means in 2012 they would pay £157.42 per month (one third of the SEL monthly rate of £472.25). Once tax assessments are available for the first year of trading, contribution levels will be re-calculated.

This change removes what has often been described as a disincentive for entrepreneurs considering their first step into self-employment.

The department has been communicating with businesses and their representatives to help them prepare for these changes, and the States website is being updated as more details are available.

Anyone with queries about these changes should call Social Security on 447343.

Employer contributions (employment and careers section)

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